How to trade TCS ahead of its Q3 results on Monday

After the stellar Q3 results by Infosys, India’s second largest IT company, all eyes will be on market leader TCS’s results due on Monday. For last 4 quarters, TCS has raced ahead of Infosys to emerge as the new IT bellwether of the Indian market. However, the dark horse of the pack remains HCL Technologies. 

Angel Broking expects TCS and HCL Tech to lead growth in the tier-I IT pack in FY2013. The broking firm expects TCS to post net sales of Rs 1,5926 crore, a growth of 2% year-on-year. Its bottomline may see de-growth of 4.1% at Rs 3367 crore.

Here are some trading strategies from broking firms and analysts to play TCS ahead of its results.

Nirmal Bang
Strategy name: Long Straddle
BUY 1300CE @ CMP
BUY 1300PE @ CMP (kindly note that the maximum outflow should not be more than 65-66)
Max Profit: Unlimited (Beyond the break-even range) Maximum Loss: 65-66
Upper Breakeven Point 1366 Lower Breakeven point - 1234
Combined Target: 100+ Exit TCS if combined premium comes below 40.

Angel Broking

Option strategy name: Ratio Call Spread
Strategy: Buy one lot of TCS 1300 CE around Rs 45, Sell two lots of TCS 1350 CE around Rs.25
BEP(Break Even Point)   Rs.1405
Maximum Risk: Unlimited, If TCS continues to move above BEP
Maximum Profit: Rs 13,750, if TCS closes at Rs 1350 on expiry

Sahaj Agarwal, AVP- Derivatives, Kotak Securities:

“TCS has outperformed in the recent past and we expect it to continue to do well going ahead. Technically it remains strong and is expected to test 1375-1425 levels. We are recommending a Bull Call spread ahead of the quarterly results.

Buy 1 Lot 1300 Call at Rs 54 and Sell 1 Lot of 1400 Call at Rs 18. Maximum Gain Rs 16000
Total Cost/ Maximum Loss Rs 9000